Business Strategy

The leading airline group in Latin America

LATAM Airlines Group S.A. (hereinafter, without distinction “the Company”, “LATAM” or “LATAM Group”) is Latin America’s largest air transport company, resulting from the association of a Chilean (LAN) and a Brazilian (TAM) airline.

The Group has domestic operations in six South American countries – Argentina, Brazil, Chile, Colombia, Ecuador, and Peru – an advantage that allows it to provide the best connectivity at the regional level, as well as from South America to the rest of the world and vice versa, reaching some 135 destinations points in 25 different countries. In addition, this allows it to have a geographically diversified passenger and cargo revenue base.

At the end of April 2016, the Company formally submitted its unified LATAM brand, which started to be visible in the website, physical spaces and aircraft, among others, a brand under which we will continue along the leadership path started several decades ago by LAN, TAM and their respective subsidiaries. This change will allow us to provide a better service and consistent across our network, strengthening our position in the region.

During 2016, the Company went ahead in its process of becoming a more simple, lean and efficient organization to adapt to the changing dynamics of the industry and the needs of our customers.

This process considers a change in organizational culture, which began to be executed with greater force in 2016 through our Twist Project at airports, contact centers and service on board. The objective of this project is to strengthen the organization with empowered teams prepared to respond to the needs of the passengers more quickly and easily, always considering the impact that their decisions may have on our clients.

Company decisions always focus on customer satisfaction. This implies a constant work toward improving passenger experience throughout the different stages of the journey, while always looking for differentiation in terms of service. This is how in 2016 LATAM continued to invest in the development of digital tools at all points of contact with the customer, in order to simplify the travel experience and provide a personalized service.

In is our permanent goal to incorporate best industry practices and adapt to industry-wide trends. By the end of 2016 the Company announced the redesign of its travel model in the six domestic markets where it operates. This will be implemented on a country-by-country basis and in stages starting in the first half of 2017. Indeed, this has become one of our projects with greater breadth and scope and relevance toward ensuring the sustainability of LATAM over the long term. This new model seeks to meet the needs of today’s passengers who appreciate the trip to be simple, efficient, and expeditious and wish to be empowered to make their own decisions and have the tools to actively influence and customize their own travel experience, thereby paying only for the services used. Passengers will be entitled to choose how to fly, paying for the additional services required and selecting the airfare that best suits their needs.

Thanks to this new form of travel, LATAM Group estimates it will increase by 50% the number of passengers transported in domestic markets by 2020, thereby consolidating air travel as a means of mass transport in the region progressively increasing the number of people able to fly, and that those who already do so may fly even more.

With respect to international operations, one of the year’s major milestones was the announcement of the execution of Joint Business Agreements (JBAs) with American Airlines and the IAG Group (Iberia’s and British Airways’ parent company), aimed at providing greater connectivity to passengers. With these agreements, the Company seeks to provide access to a wider network of international destinations, more flights, better connection times and better prices to destinations not flown by LATAM. The Group expects the respective approval processes to make progress rapidly so as soon to become a reality, in order to connect more and more people from Latin America to the rest of the world and vice-versa.

In its continuous effort to strengthen the network, in 2016 the Company opened 18 new routes – a historical record for LATAM. Noteworthy among them is the first flight from Brazil to Johannesburg, becoming the only Latin American airline that now connects the region with the African continent. It should also be noted, moreover, that many of these new routes will help to further boost our main regional hubs, such as the Lima and Sao Paulo airports. LATAM reduced its fleet commitments through postponements and cancellations, and will also reduce its current fleet assets returning additional aircraft as compared to last year’s fleet plan.

With this, the Company will have achieved a reduction of $2.2 billion in fleet assets between 2016 and 2018, in line with previously announced plans to achieve a reduction of US$ 2.0 to $3.0 billion in our expected 2018 fleet assets.

In line with the Company’s strategy to make its operation more efficient, during 2016 LATAM received 24 aircraft of the more large, modern and efficient models that allow transporting more passengers consuming less fuel, thereby adapting to current market conditions in a more efficient manner. In line with the foregoing, LATAM keeps its commitment to offer its passengers the best fleet in Latin America. To that effect, in 2016 the company incorporated the first Airbus A320neo to its fleet; thus becoming the first airline in America to operate this ultra-efficient aircraft model, whose greater flying range does not only allow it to operate its domestic but also its regional network.

Additionally, LATAM incorporated six Airbus A350 to its fleet, ending the year with a total of seven aircraft of this model; which stands out because of a CASK up to 25% lower than similar size aircraft.

All things considered, in 2016 LATAM Group opened a new chapter in the history of world aviation. The new brand poses the challenge of delivering a unique and improved service experience, offering to the world the best of South America, while becoming a more efficient and productive group operating in simpler ways. The Company aspires to be among the best airlines in the world, and the initiatives that are currently underway indeed provide ample opportunity to achieve this objective.